2018 (4) TMI 670 - AT - Service Tax

Recovery u/r 14 of CCR readwith Section 73 (2) of the Finance Act, 1994 - input service distribution (ISD) - demand on the ground that they have wrongly availed cenvat credit in respect of Haridwar Unit which is manufacturing excisable goods which are exempted from duty in terms of N/N. 50/2003 - case of appellant is that Appellant is mere Input Service Distributor and has himself did not avail cenvat credit hence the recovery in terms of Rule 14 is not sustainable. Held that - the Input Service Distributor registration is only for the purpose of distribution of credit. He can be held accountable only in case of improper distribution of credit which is not the issue in the present case. This Bench in the previous proceedings against the Appellant in Mahindra & Mahindra Ltd. Versus Comm. of Service tax, Mumbai 2017 (7) TMI 167 - CESTAT MUMBAI has already held that Rule 14 of CCR can be made applicable only on the person who avails the Cenvat credit wrongly or utilizes the credit,it is not invokable against the Input Service Distributors. Demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Incorrect availing of cenvat credit by an Input Service Distributor
- Applicability of Rule 14 of Cenvat Credit Rules on Input Service Distributors
- Responsibility of Input Service Distributors in credit distribution

Analysis:
1. The case involved the appellant distributing credit as an Input Service Distributor among their factories, leading to a show cause notice for wrongly availing cenvat credit for a unit manufacturing duty-exempt goods. The adjudicating authority confirmed the demand under Rule 14 of Cenvat Credit Rules and Section 73(2) of the Finance Act, 1994.

2. The Appellant argued that as an Input Service Distributor, they did not avail cenvat credit themselves, relying on previous tribunal judgments. The Revenue contended that Rule 9 of CCR, 2004 mandates ISDs to avail and distribute credit, with Rule 14 applicable for wrongly taken credits, emphasizing statutory provisions' interpretation.

3. The Tribunal analyzed the case, noting that an ISD is accountable only for improper credit distribution, not applicable in this instance. Referring to previous proceedings, the Tribunal held that Rule 14 applies to those wrongly availing or utilizing credit, not ISDs. The Board's circular clarified that SCNs for credit recovery cannot be issued to ISDs.

4. Citing a previous Tribunal decision involving Indian Oil Corporation Ltd., the Tribunal reiterated that recovery of wrongly availed credit should be from the manufacturer or service provider, not ISDs. The impugned order against the Appellant was deemed unsustainable in law, leading to setting aside of the demand and penalties, allowing the appeal with consequential reliefs.

5. The Tribunal concluded that the demand and penalties against the Appellant were not sustainable, setting aside the impugned order and allowing the appeal with consequential reliefs. The cross-objection was also disposed of accordingly, with the judgment pronounced on 21/03/2018.